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Yes Securities Report
Bank of Baroda's reported net interest margin in Q4 was 3.53% but adjusted for the benefit from one-off recoveries, the NIM would have been 3.41% (in Q4). Management maintained margin guidance at 3.3% for FY24.
While there will be some more rise in cost of deposits, there is still some repricing of marginal cost of fund based lending rate book that will play out. Furthermore, change in portfolio mix may aid margin by about 5 basis points. It may be noted that BoB is focusing on lower-tenure but somewhat higher-cost (bulk term) deposits since the rate cycle is expected to turn in Q3 and Q4.
Gross non-performing asset additions had amounted to Rs 27.44 billion during Q4 FY23. Provisions were Rs 19.47 billion, up by 37% QoQ and 15.5% YoY, translating to calculated annualised all inclusive credit cost of 82 bps. Specific credit cost for the quarter amounted to 70 bps. Adjusted for discretionary provisions taken during the quarter, the normalised credit cost amounted to 44 bps.
For the retail book, BoB is aiming to grow 4-5% points higher than system growth. The overall growth guidance is 14-15%, within which the corporate book is expected to grow 12-13%, the retail book at 18-20% and the international book at 15%. The share of corporate book is 42% and is expected to decline to 35% in three years.
We value BoB at 1.0 times FY25 price/book value for an FY24E/25E/26E return on equity profile of 14.6/15.9/16.0%. We assign a value of Rs 18 per share to the subsidiaries, based on SOTP.
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